"The biggest shortage on the planet today is competent engineers," said Robin Saxby, CEO of ARM. "There's a declining interest in engineering degrees at the very time we're expanding and needing the people," said Lucent Microelectronics CEO,John Dickson.

"Today, not only is the industry experiencing a period of scarce availability of human resources, but some observers are even imagining a future slow down in growth because of insufficient availability of skilled and trained people," said Pasquale Pistorio, CEO of STMicroelectronics.

Pistorio pointed to a significant resource - Sicily's Aetna Valley which has 1,300 students in its engineering faculties. "Today, an engineer at an equal level of know-how and productivity in Sicily costs us at least 30 per cent less than in Milan, 50 per cent less than in most other European countries and one third the cost we experience in our Silicon Valley locations," said Pistorio.

Lucent's Dickson quoted the US Engineering Workforce Commission which recorded that between 1986 and 1989 there had been a 19 per cent decline in engineering degrees and a 44 per cent decline in electronics engineering degrees.

He also quoted US Department of Education statistics for 1990-96 which recorded a five per cent drop in high-tech degrees for the six year period, and a 22 per cent drop in electronics engineering degrees.

"There is a divergence between the availability of people and the requirements of the industry which we're not going to turn round in the next ten to fifteen years," warned Dickson.

Pistorio had a more hopeful scenario for Europe, than Dickson's US scenario. "While today the demand for engineers exceeds their availability in Europe, I am convinced that, in the long term, the superior European infrastructure in terms of the general schooling system, universities and research institutes will offer us a strong competitive advantage".

Pistorio added: "East-European countries like Poland, the Czech Republic, Hungary or Rumania offer employment opportunities that are far from being sufficiently exploited".

In response to these publicly expressed opinions, there were some private conversations in which press representatives pointed out to executives that whenever their publications ran stories about engineer shortages they received many letters and emails from engineers - usually in their 40s and 50s - who were finding it extremely difficult to get jobs.

Privately, executives conceded that they principally wanted younger engineers, with a few years experience, able to travel unrestrictedly, and prepared to work unusual - and sometimes unusually long - hours.

For this ideal specimen, the press people pointed out, a company would, nowadays. have to offer both interesting, leading-edge projects to work on and stock options or other success-related rewards.

Privately executives conceded that the ideal engineer, as described, is becoming extraordinarily difficult to find, and that they should be looking at re-training and re-skilling existing engineers and working with them, adapting their companies to fit in with the particular circumstances of middle-aged staff.

After all, if companies are prepared to set up design centres in Brazil, India, China and Russia to recruit local engineers, it shouldn't be beyond their powers to accommodate older engineers.

Furthermore, it is pointed out that recent takeovers of engineering rich companies like Phoenix VLSI by Texas Instruments, and Element 14 by Broadcom, have valued engineers at $1m a head.

So it would very likely be cost-effective to spend money on getting older engineers into the workforce. And clearly there is scope for European governments to provide help in this area.

The company started to slip. Between 1973 and 1979 the company fell from No.2 in the industry to No.6. In MOS, it was 14^th.

The company took to second sourcing other companies' MOS products - a low margin activity - but failed to build proprietary MOS products.

"They can't build MOS worth a damn," said one engineer as he walked out in disgust.

Between 1975 and 1979 the company's sales grew at half the industry's growth rate.

And then the company was sold to foreigners.

MORAL: Keep Up

The sum of the whole has always proved to be less than the parts, with the consolidated company shrinking just as its constituent parts had been shrinking.

Now Renesas, Panasonic and Fujitsu are talking about merging their semiconductor businesses. It is thought the process could take a year.

The strategy will  most likely fail in the future as it has failed in the past. "How many more times does 1 plus 1 have to equal a half before someone realises this might not be the right strategy?" asks Europe's leading semiconductor analyst, Malcolm Penn, CEO of Future Horizons. 

 Renesas was formed by a merger between the chip businesses of Hitachi and Mitsubishi in 2003. At the time of the merger Renesas was the world No.2 semiconductor company.

In 2010, NEC Electronics, the semiconductor subsidiary of NEC, was also merged into Renesas and, in 2011, the combined company was the world No.7 semiconductor company.

There is also talk that the manufacturing activities of all the merged companies will be spun off into a joint venture between Globalfoundries and a Japan government-backed body Innovation Network Corp.

Manufacturing was always the Japanese companies' outstanding strength. This plan will ensure the end of that advantage.

The Japanese government is expected to back such a joint venture with a large investment - a case of taxpayers paying to destroy productive industry.

The last best chance for the Japanese semiconductor companies to retain their independence came in 2006, when a joint foundry project, backed by the government, was proposed.

A company called Advanced Process Semiconductor Foundry Planning Company under the leadership of Hirokazu Hashimoto of NEC was set up.

However after extensive talks the project failed because the different companies involved could not agree on what processes the foundry should run.

"The basic idea of the foundry is because there are not so many IDMs which can afford next generation fabs," Dr Tsugio Makimoto, former CEO of Hitachi semiconductor, told me at that time, "the rest of the IDMs will go fab-lite."

Looking back at their imminent consolidation today, I bet the CEOs of those companies which rejected the foundry plan now wish they hadn't. The foundry plan would have given them autonomy - a lesser autonomy than before admittedly, but still autonomy. Now they're losing all their autonomy.

With the collapse of the foundry initiative, the seeds were sown for the destruction of the autonomous Japanese IDMs.

The high point for the Japanese semiconductor industry was reached in 1988 when six Japanese semiconductor companies Matsushita/Panasonic, Mitsubishi, Hitachi, NEC Fujitsu and Toshiba - separately enjoyed positions in the world's top ten semiconductor producers.

Since then, consolidation has not stopped the overall Japanese semiconductor industry decline. Only Renesas and Toshiba are in the top ten today.

Japanese companies have been kings of the world's consumer electronics industry since the 1980s when they stormed the world market with colour TVs and VCRs.

But, in the 90s, the Koreans started eating away at their dominance and, in the current decade, Apple started dismantling it wholesale.

Now Matsushita says it will lose Y780 billion ($10 billion) in the year to the end of March 2012, Sony says it will lose Y220 billion ($2.9 billion), and Sharp says it will lose Y290 billion ($3.8 billion).

Ominously for the Japanese, Samsung says it will spend $22 billion on capex and $21 billion on new product development this year.

Curiously, the spate of ingenious new products out of Japan, which enthralled the world' consumers for a couple of decades, started to dry up at around the time the Japanese companies became very concerned with their balance sheets.

ROI, ROE, RONA etc are no substitute for great products.

John Sculley

Mark Hurd

Carly Fiorina

Meg Whitman

John Rogers

John Roth

Frank Dunn

Mike Zafirovski

Bob Allen

Asked if the delay to the ST-E processor and modem is due to the delay in getting the 28nm process up and running, Jean-Marc Chery, ST's CTO, says: "ST has already delivered ORLY, the most advanced SOC  for set top box on 32/28 nm low power technology developed at ISDA which ST is part of. So this technology is ready for prototype and production ramp up since early 2011 at ISDA Foundry partners of ST and is transferring at CRolles. So the reason STE has missed product introduction must be found out of technology process and design enablement availability".

At ST-Ericsson the word is:  "At this time, we are still planning the A9600 as a 28nm product sampling in 2012 and we are working with ST and the ISDA alliance," says Pam McCracken.

Asked if the A9600 would be sampled from Crolles or from the fab of an alliance partner, McCracken replied: "We are not ready to disclose that yet."

So, 50 years ago, starts a Letter to Electronics Weekly in its issue of May 24 1961 written by the managing director of RCA Great Britain Ltd, Donald MacPhail.

'Until recently RCA Great Britain offered the 2CYP22A colour picture tube in small quantities for £53.'

'Following a recent reduction in the US, the price is now £49.'

'A few weeks ago RCA announced a new colour picture tube - type 21FBP22 - which offers an increase of 50% in brightness due to the new sulphide phosphors used. The price of this tube is £51.'

'In all cases these prices are for small quantities only.

The price for the new 21FBP22 tube in large quantities - say in excess of 500 tubes - is expected to be less than £40 landed in the UK.

'Customs duty has not been called for because there is no equivalent product in manufacture in the UK.'

A day or two later, the entry reads:

'Saw the vp for analogue this morning. Most of his stuff is sold through distributors so his division is ideal for what I have in mind.'

'"Look Fred, I told him, the market's as flat as a pancake but I have to deliver growth for the sponsors" (that's the pissy name we have to use for the private equity company which owns us) "and I thought that you, with your great distie relationships, might be able to persuade them to take more product."'

'"How does that help us?" asked the analogue vp, "they can take more product, but they won't be able to sell it and will simply order less the following quarter".'

'"Yes," I tell him," they don't have to actually take the stuff, just put in bigger orders which we can recognise as increased revenue for the next quarter or two".'

'"Why would they agree to do that?" asked the analogue vp.'

'"Because you'll offer them special terms on the extra amount ordered - you know the sort of thing," I told him, "offer them anything within reason, but just enough to get the job done".'

'"Sounds like fiddling the books to me, Ed', said the analogue vp.'

'"Nah, the CFO's cool with it," I lied, "it's just for a quarter or two while I get these guys off my back and I can find some genuine growth. And, Fred, no need to tell anyone else here about it. Between you and me, OK?"'

A day later the diary reads. 'Got a call from A Brat today: '"Don't try that again Ed," said a nasty-sounding Brat, "we want real growth not smoke and mirrors with possible legal come-backs. Remember your contract says we can terminate you at any time without cause, without notice and without compensation".'

'That bloody Fred,' writes Ed, 'turns out he went and asked the CFO if he was happy with the distie deal and the CFO reported the conversation to The Brats. I thought I could trust Fred. Maybe I can't trust anyone here. God knows who else is reporting to the PE bastards (a.k.a. our sponsors) behind my back. The sooner I'm out of here the better. Roll on my $25 mill.'

Manufacturing ICs very much depends on the operators. Their skill determines yield and yield determines cost and cost determines profit.

Appleton's great friend, with whom he shared a love of fast cars, Ulrich Schumacher of Siemens Semiconductor (later Infineon) took a group of his people over to Idaho

"I think Micron felt sorry for us," recalls Schumacher, "for two days they showed us everything. They showed us through the production lines. I t was lucky they didn't throw us out. I really think it was because they felt so sorry for these poor little guys that they said: 'Let's show them the real world and then they'll give up'."

The Siemens team found that Micron had a 45mm 1Mbit DRAM  compared to the Siemens 72mm die, meaning it cost Micron 30% less to make their chip. It was a wake-up call.

Not many CEO would have done what Appleton did. It was a generous gesture and a supremely self-confident one.

He was a very fine man - up-front, direct, straight and true.

They say they saw the economic situation as it was pre-2008 i.e. governments flooding the world with liquidity post-9/11 - so bankers simply did their job which is to find investments for that liquidity.

The result was massively over-leveraged deals like Freescale and NXP.

So far, so bad, but that is not why bankers need a wake up call.

After the collapse and tax-payers' bail-out, bankers went back to over-paying themselves.

Goodwin fought tenaciously for all his redundancy and pension rights. He seemed unashamed of busting his bank, unconcerned that ordinary people would be worse off because they were paying for his bank to be saved.

Had Goodwin not fought for his various entitlements, he would not have become a pariah.

There was a telling phrase in one of the American documentaries on the credit crunch: "The bankers turned their backs on society."

Those bankers which have tried to justify their behaviour say that in their work they're not concerned with morality.

Why not?

If we decide we are not concerned with morality, then we self-label ourselves as pariahs.

"They were very flamboyant," writes Lojek, "a few of them wanted to impress customers with several gold chains and open-necked shirts, Jerry Sanders was wearing white suits and was at the time very 'Hollywood'."

Sanders also took a high-handed attitude to customers - only responding to orders of over $5 million.

Under this strategy, Fairchild got all its orders from 300 customers while TI had 1000.

Sanders soon left after Hogan arrived to found AMD with John Carey, Jack Gifford and others.

As CEO of AMD, Sanders was a revelation - turning up at Electronica one year with the spectacular Tawny Capriccio (later Mrs Sanders) wearing matched ankle length mink coats. Sanders in a white one and Tawny in a black one.

Unforgotten to this day.

Intel's move on the wireless market may fail for the same reason that its X-Scale and ASIC ventures failed - because it's not putting its wireless parts on advanced processes.

It is only this year, some 18 months after Intel started running its 32nm process, that a wireless chip-set - Medfield - is going to be run on a 32nm process.

The date for putting Atom on the next-generation 22nm process is 2013, although Intel's 22nm process is due for introduction this year.

 

Meanwhile, ARM and TSMC are  making  wireless chips in volume on 28nm nd expect to be in 20nm production at the end of this year.

 Asked about this, Intel's Alistair Kemp told me: "Last year we stated our intention of moving Atom up to the front of the process node." However, the first node at which Atom will be at the front of the node - i.e. one of the first products to be made on that process generation - will be 14nm, says Kemp.

 

Meanwhile Atom is late to 32nm and late-ish to 22nm assuming that 22nm gets into production this year.

That is par for the course for an emerging business unit at Intel - they have to fight for leading edge capacity and usually don't get it.

In January 2007, shortly after Intel's X-Scale business was sold to Marvell, I asked Jeff Krisa, who was general manager of the X-Scale group at Intel, and who went with the group when it was sold and headed the group at Marvell, if one of the reasons for the group's failure at Intel as that the group was not given access to Intel's latest processes, Krisa replied: "Access to the latest processes was delayed."

The reason why it was delayed is simple. Intel's fab managers have a lot of autonomy over what silicon they run and they prefer to run high value silicon rather than low value silicon.

This process is described by Intel's former Chairman and CEO Andy Grove In his book, Only the Paranoid Survive. Grove describes how, while he and Gordon Moore were having the discussion which ended with them exiting the DRAM business, Intel employees were already making the decision for them. Grove writes: "Men and women lower in the organisation, unbeknownst to us, got us ready to execute the strategic turn that saved our necks. Over time more and more of our production resources were directed to the emerging microprocessor business, not as a result of any specific strategic direction by senior management, but as a result of daily decisions by middle managers. Bit by bit they allocated more and more of our silicon wafer production capacities to those lines which were more profitable, like microprocessors, by taking production capacity away from the money-losing memory business. By the time we made the decision to exit the memory business, only one out of

So it could very well be that Intel's fab managers don't want to run little bits of silicon selling for $20,  when they could be running big chunks of silicon which can be sold for several hundred dollars in gazillions of units.

At the same time, Intel may be finding it is taking longer than it expected to wrap the IP around the Atom core to make a wireless SoC,.

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It was extremely successful, not because of the sheer number of design wins achieved by the campaign-  which was over 2,000 - but because one of the design wins was the most famous design win in the history of the industry.

It propelled the company to great wealth and power.

MORAL:  Wise is he who looks ahead.

In February 2011, six months after Leibowitz made his remarks, the President of the USA established the  President's Council on Jobs and Competitiveness.

One of the members of the Council on Jobs and Competitiveness is Paul Otellini.

A fly on the Oval Office wall heard this:

"Well Paul how are we going to inject competitiveness into our economy?"

"MDF," came the reply.

"What's MDF, Paul?"

"Well Mr President, It's like  you telling an Arab dictator that if he steps down  the US will give him cash, a safe haven and a pleasant retirement  - and if he doesn't he'll be eliminated in a nasty way."

"How does that work in your business, Paul?"

"We give our customers cash, guarantees of secure supplies, subsidies for their advertising budgets, preferential prices and superior designs for their products on condition they don't buy our competitors' products."

"And that's good for competitiveness in your industry, Paul?"

"Certainly Mr President, because it means we win."